January 21, 2025
People the world over are wondering what’s up with the bromance between Donald Trump and Elon Musk , while some auto industry analysts might be scratching their heads trying to reconcile the reelected president’s staunch anti-electric vehicle stance with Musk’s pioneering role at Tesla .
At first glance, you might think these conflicting points of view would present an insurmountable barrier to this high-profile political hookup. But dig deeper and you’ll understand exactly why the president’s plans to scrap the Environmental Protection Agency’s de facto EV mandate, eliminate generous federal EV tax incentives and pull the plug on billions in EV charging infrastructure investment won’t affect Tesla at all but will severely disadvantage legacy automakers.
It’s obvious what the Trump campaign saw in Musk: money. In politics, it’s always about the money. But what was Musk after? Let’s be honest — he didn’t have many options.
The Biden administration slammed the door in Musk’s face and pursued EV policy initiatives designed to help legacy automakers, not Tesla (e.g., EV incentives for union-built vehicles, no EV infrastructure money for Tesla’s segregated charging network). Eventually, Musk saw he was going nowhere with the Biden-Harris team and shrewdly concluded that the anti-EV policies advanced by the Trump campaign could work to Tesla’s advantage and perhaps hinder growing competition from legacy automakers.
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Look at it this way. Trump’s plan to eliminate the EPA’s emissions mandate won’t affect Tesla, since it builds and sells only EVs. And scrapping the EPA rule provides only scant relief to legacy automakers since:
The stringent California Air Resources Board rules mandating increased EV deliveries in 15 states and the District of Columbia (which together account for nearly 40 percent of all light-duty vehicle sales in the U.S.) remain in effect.
Any effort to eliminate the EPA clean-car regulations makes it harder for existing CARB states to withdraw.
Tesla needs CARB states to stick with the program to continue to rake in billions from competing automakers, who are forced under the CARB rules to buy Tesla’s excess zero-emission vehicle credits.
The CARB rules are making the richest man in the world richer. Unlike the EPA’s de facto EV mandate, the CARB EV mandate carries real financial consequences. Last year, for example, competing automakers were forced to buy $2 billion in ZEV credits from Tesla because they failed to meet CARB mandates. And as the CARB ZEV mandates ratchet up to 35 percent, 43 percent, 68 percent and eventually 100 percent by 2035, the value of Tesla’s ZEV credits will grow exponentially.
Under this nightmare scenario, Tesla will be “earning” billions more in CARB credits while legacy automakers lose the federal tax breaks that have propped up anemic EV sales and encouraged widespread automaker investment in EV manufacturing and battery plants. Tesla won’t miss the federal tax incentives when they’re gone because the value of their ZEV credits will skyrocket as legacy automakers are forced to balance the difficult economic choice between losing money delivering a growing volume of unprofitable EVs to CARB states or buying increasingly costly ZEV credits from Tesla.
The massive subsidies legacy automakers are forced to pay Tesla will drive up their cost of doing business and make it difficult to get a return on EV investment. At the same time, these CARB-forced subsidies will add billions to Tesla’s income statement.
Moreover, doing away with the billions in infrastructure authorized under the Inflation Reduction Act will help solidify Tesla’s one and only real marketplace advantage: its extensive, albeit segregated, charging network. If federal dollars for EV charging infrastructure dry up, Tesla’s dominance in high-speed charging is certain to steer more consumers Tesla’s way.
But, “Ah,” you say, “The Trump administration is going to do away with the CARB rules, and the EPA is going to revoke the California waiver.” Don’t bank on it. First, Trump tried that last time around and failed. Second, the legacy automakers have all pretty much signed on to the framework agreement that says they won’t back out of CARB, even if the EPA denies the waiver or there is a protracted legal challenge.
There’s no mystery to the Trump-Musk bromance. Candidate Trump was after Elon Musk’s dark money political clout, and Musk shrewdly recognized Trump EV policies would drive Tesla profits and slow the growing EV competition from legacy automakers.
